Goods Prices Increase, as Services Costs Lag

A few months ago, the Journal pointed out the rising disconnect between goods prices in the U.S. and services prices.

Goods prices face upward pressure because goods tend to be globally traded and are getting pushed higher in part by demand abroad. Meanwhile, service prices, which are less subject to the whims of demand from abroad, are being held back because there’s so much slack in the domestic economy. In other words, despite public hysteria from some quarters in recent months about hyperinflation hitting the U.S. economy and on the other hand about deflation risks, the truth is that consumer prices are being pulled in two directions at once.

The trend has only intensified. Here are some data and charts — based on today’s consumer price index report released by the Labor Department — that bear out this point. The data are all year-on-year percent changes through April.

Overall, goods prices were up 5.7% from a year earlier in April, thanks in part to rising gasoline prices. Services prices, meanwhile, were up just 1.5%. They appear to be rising, but at a glacial pace, and in some sectors they still are slowing down.